FHA loans are a great lending option, they are popular because they are easily approved and don't require you to meet a whole bunch of stringent rules like the other loan options available today. Depending on the robustness of the housing market in the region and country you reside, these loans have some differences. Before you consider taking such a loan it is recommended that you research and find all the facts and details about the FHA loans.
The interest rates of FHA loans are fixed and are usually low in contrast to sub prime mortgage loans which vary through the term. The interest rates on sub prime loans are raised in the fifth or sixth year and usually become very high by the end of the term which makes repayment difficult. Not many home buyers are informed about the FHA loans and sign up for sub prime structured loans instead.
The eligibility criteria of the FHA loans are flexible and easy to meet and most buyers will qualify for it. The traditional home loans have strict requirements and only those with a credit score of 740 or higher are eligible. On the other hand FHA loans are available to those with a credit score as low as 640.
People with bad credit history that includes financial issues like foreclosure or bankruptcy can borrow money through FHA. But there are some rules concerning bad credit, the borrower is required to have an improved and perfect credit history for 2 years following a bankruptcy and 3 years following a foreclosure.
Some of the other requirements to qualify for FHA loans is that the borrower must have a history of steady employment for a minimum of two years. The work history is more valued if the borrower has been working for the same employer as it shows a stable monthly income with periodic hikes.
The most important requirement to qualify for an FHA loan is the down payment; you will need to pay a minimum of 3.5% as down payment. The monthly mortgage payment will be restricted to thirty one percent of the borrower's gross monthly income. You will be required to pay mortgage insurance when you accept the loan package. This is looked upon as a drawback by some people but it is actually an advantage as it gives you the option of using an FHA Streamline Refinance if you ever need one in the future. An FHA Streamline Refinance is easy to get approved; you need not go through a lengthy and demanding process for determining your eligibility like other traditional loans.
If you are in the process of applying for FHA loan then you must remember that an FHA loan may be less than the amount other conventional loans offer. The exact amount varies with your area and country. In the US, the HUD or US Office of Housing and Urban Development regulate the amount you can borrow through an FHA loan. The loan amount available is based on the average home price the borrower lives in. This means that a person living in an area where housing prices are higher than the countries average will be able to borrow a higher amount through FHA loans [http://www.bestratesource.com/fha-mortgage].
The current real estate market is recovering and is looking resurgent. In this scenario the advantages of an FHA home loan outweighs any disadvantage it may have. Make sure you research well before you apply for the loan. If you need more details and information about the requirements or eligibility criteria of FHA loans then visit the links listed here.